Research Update: Formosa Plastics Companies Outlook Revised To Negative From Stable On Weak Profitability; 'BBB+' Ratings Affirmed

Persistent pressure on profitability and a jump in adjusted debt in 2022 will likely keep the financial leverage ratios of four Taiwan-based petrochemical companies higher than current ratings indicate. The four are Formosa Plastics Corp., Nan Ya Plastics Corp., Formosa Chemicals&Fibre Corp., and Formosa Petrochemical Corp., which generated combined EBITDA of new Taiwan dollar (NT$) 130.5 billion in 2022. We expect continued capacity additions in China and weak demand globally to constrain a rapid rebound in their profitability in 2023-2024. We therefore revised our outlook on the long-term ratings on the four Formosa Plastics companies to negative from stable. At the same time, we affirmed our 'BBB+' long-term issuer credit ratings on the companies, as well as the

...- Persistent pressure on profitability and a jump in adjusted debt in 2022 will likely keep the financial leverage ratios of four Taiwan-based petrochemical companies higher than current ratings indicate. The four are Formosa Plastics Corp., Nan Ya Plastics Corp., Formosa Chemicals & Fibre Corp., and Formosa Petrochemical Corp., which generated combined EBITDA of new Taiwan dollar (NT$) 130.5 billion in 2022. - We expect continued capacity additions in China and weak demand globally to constrain a rapid rebound in their profitability in 2023-2024. - We therefore revised our outlook on the long-term ratings on the four Formosa Plastics companies to negative from stable. At the same time, we affirmed our '###+' long-term issuer credit ratings on the companies, as well as the '###+' long-term issue ratings on their unsecured common corporate bonds and the bonds that Formosa Group (Cayman) Ltd. issued and proportionally guaranteed by the four companies. - The negative outlook reflects an increasing...

Research Update